Australian agribusinesses help export markets to feed themselves

By Jared Lynch

A 747 jet will take off from an Australian airport on Monday, carrying the first of three plane loads of sheep to Inner Mongolia.

Sheep thrills: Australia is not only exporting live sheep to Asia but also cattle as well.

Photo: Jessica Shapiro

There they won't land on a dinner plate, like many Australian agriculture products being sent to Asia in an effort to capitalise on the region's fast-growing middle class.

Instead, they will be taken to pasture to help improve the quality of the Inner Mongolian flock.

This is what Tim Harcourt, a former chief economist of Australia's international trade promotion agency Austrade, calls the other prong to the Asian dining boom.

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"We can't feed Asia, or the Middle East for that matter, single-handedly but our expertise is actually quite handy. I've met a lot of dairy farmers in China helping the Chinese build up their capacity," Mr Harcourt said.

He is not the only one who has dismissed claims - often made by state and federal politicians - that Australia could be the food bowl of Asia.

Bega Cheese executive chairman Barry Irvin and NAB chief economist Alan Oster said earlier this year that Australia's agriculture industries didn't have the capacity to feed all our northern neighbours.

"The notion that Australia will somehow become the food bowl of China, or the food bowl of Asia - what some people are calling a 'dining boom' - is very much misguided," Mr Oster told Fairfax Media in April.

But Australian agribusinesses can help key export markets feed themselves.

And this is what listed agriculture company Elders hopes to achieve in flying thousands of sheep to China.

"These sheep are going in there to expand and improve the genetic base," Elders general manager for trading Cameron Hall said. "It's quite interesting. Certainly Australian sheep can go up into those regions and perform very, very well."

But it's not only sheep. Elders exports ups to 40,000 head of dairy cattle, mostly to Asia, each year, and has done so for much of the past decade.

In 2009, it even shipped 1800 cows from western Victoria to the Middle East to help build dairy farms in the Saudi Arabian desert.

"It's about building a domestic fresh milk capability, and that's no different to what's happening in China," Mr Hall said. "It's just on a far greater scale in China."

Mr Cameron said the company was not just shipping livestock to emerging dairy markets but veterinary, husbandry, handling and animal nutritional advice.

"As countries increase their wealth, they have a growing middle class. After about $US5000 per year of income, they really start to spend a lot of money on food. And it's quality and volume of food.

"There has been dairy cattle go into Indonesia and even Vietnam, where again in those domestic markets there is a demand for fresh milk where historically a lot of that product was reconstituted from milk powder to other forms."

The world's biggest dairy exporter, New Zealand's Fonterra, has operated in China for about 40 years. But the co-operative's director of operations and ingredients Bruce Donnison said it's only been since 2007 that it has helped increase China's domestic milk supply.

Seven years ago Fonterra began a pilot farm project in the Asian powerhouse with an aim to produce New Zealand standard milk. That trial has now grown into a "hub" of five farms with 15,000 cows that produce about 150 million litres of milk a year. It plans to grow this to eight hubs, producing 1 billion litres of year by the end of the decade.

Mr Donnison said building domestic supply was not a threat to Australian and New Zealand exports. China, he said, would always be a net importer of dairy products because of lack of water and farm land.

"China has 9 per cent of the world's arable land. It will always need to be an importer of safe food," he said.

From 2007 to 2011 China's demand for dairy increased threefold to the equivalent of 10 billion litres of milk – more than Australia's entire production. And that demand is continuing to grow.

"To succeed in China, we must play a constructive role," Mr Donnison said. "That's why our strategy in China is multi-pronged."